We did a similar thing to Geoff, bought into T1.
In fact we spoke to a lot of our friends and family and asked them if they were taking up their allocation. If they weren't we asked for it...this way we built up a fair-sized stake.
Then at an appropriate point we sold all the shares and used it as a deposit on a property. Sold somewhere in the $8 range from memory.
When T2 came round, we didn't want to buy in as there was no upside (being in the industry, and having done work with Telstra I could see what was coming). The rest is pretty much history.
Personally I don't see much upside for the company today at it's present size.
Telstra is one of the most profitable Telcos in the world. Translation, there's not much space to increase margins even through cost reductions.
Telstra is currently facing a market in transition from high-margin, monopoly (they have 90% of the market) PSTN phone calls (the ones most people make today), to low-margin, highly competitive VOIP phone calls. Translation: The amount of bread in Telstra's main bread and butter is decreasing, meaning that while they can remain profitable the profits will decline.
Telstra is borrowing to pay dividends. Translation: Steve Navra will tell you how dangerous it is when a company cannot fund dividends out of cashflow, they are not sustainable. And a twelve-month commitment to continue to provide dividends is nothing.
Broadband is the battleground for the future - as IP (Internet Protocol) will carry everything from voice to video, cheaper, faster and digitally. There are over 600 ISPs in Australia, plus the mobile phone companies and wireless providers. Telstra has 50% of the market through Bigpond. Certainly it may be able to grow further, but at what cost? And broadband isn't as profitable as the services it replaces. Translation, Telstra has to spend a lot to grow market share, and each additional point costs it more. At some point it becomes uneconomic, and the margins are down anyway.
Telstra is trying to shift to being a content provider, offerring movies, music and game downloads and live video and news at the moment....but how much is this really worth in terms of revenue and profit. Everyman and his dog is competing in this space now, and Telstra lacks a number of key advantages - for instance Telstra doesn't create content, so everything they sell is available elsewhere, often for cheaper prices. Translation: Even Telstra's management doesn't see a future for Telstra as a pure telco....and the content game is intensely competitive and controlled by the content producers - who can undercut Telstra's prices almost at will.
Finally, Telstra is one year into a five year structural change. I've not seen it documented anywhere what the outcome of this change will be (and I read all Telstra's public papers on the matter) or how it will drive better returns to investors. Certainly they're doing the right thing, but it means there's four years of pain left for shareholders before the light. Translation, don't expect quick profits from Telstra, there's worse to come.
So while I reckon that Sol is making all the right moves to make Telstra more effective and a lasting major player in the market in the future, this doesn't necessarily mean that Telstra will ever again be as dominant, as large or as profitable as it is today.
I'm happy to go on the record saying that we've reached a high water mark for the company. We're now going to see the tide go out for a long time before it turns.
Oh, and their wireless 3G network is a bit of a furfy....the cable network is also - DSL (ADSL2+, VDSL and further emerging standards) can achieve almost as good results with significantly less expenditure, and prolongs the life of their current copper network. All a cable network does is raise the barriers to entry, so Telstra can shake off the other 650 ISPs using their copper network.
Cheers,
Aceyducey